Bitcoin crash wipes $477 mln longs! Are BTC bulls ignoring the warning signs?

Key Takeaways

Bitcoin fell near $108k as Funding Rates stayed high on Binance, triggering $477 million long liquidations and raising risks of deeper downside.

Since facing rejection at $117k four days ago, Bitcoin [BTC] slid sharply, falling to a low of $108,717.

As of this writing, Bitcoin traded at $110,197, marking a 2.04% decline over the past 24 hours.

Amid this drop, analysts stayed split on Bitcoin’s prospects. One of them, CryptoQuant’s analyst Arab-Chain, flagged the imbalance between derivatives and spot action on Binance.

Funding Rates reveal the imbalance

According to CryptoQuant, Bitcoin’s Funding Rates on Binance stayed positive throughout August despite the price decline.

Over this period, this metric hovered around 0.005 and 0.008, which are usually considered highly elevated. Typically, positive Funding Rates signal traders kept opening leveraged longs while paying high costs.

Source: CryptoQuant

Such market behavior reflected considerable optimism, not necessarily driven by strong price fundamentals. 

Naturally, this mismatch hinted at investor belief that the decline was only a temporary correction, keeping optimism alive.

Liquidations start to bite

Source: CryptoQuant

However, this optimism carried an elevated risk for long liquidations. In fact, this risk became clear over the past day, with Long Liquidations reaching a four-month high of 4.3k BTC. 

With $477.5 million worth of longs liquidated, a prolonged squeeze further deepened selling pressure.

Spot market feels different 

Surprisingly, while demand for Futures positions remains elevated, investors in the Spot market are closing positions.

According to CryptoQuant, Bitcoin saw a positive Exchange Netflow from the 17th to the 25th of August, with the 26th as an exception. 

Source: CryptoQuant

Such sustained inflows to exchanges suggested aggressive selling. This behavior pointed to fading confidence, with investors closing to avoid losses or lock in gains.

Historically, higher selling activity preceded further declines, adding weight to BTC’s bearish pressure.

Derivatives vs. spot: who wins?

According to AMBCrypto’s analysis, Bitcoin declined to $108k as longs worth $477 million got liquidated. At the same time, it rebounded as even more buyers jumped in to take more long positions.

And so, Bitcoin’s Taker Buy Sell Ratio signaled recovery, jumping from 0.89 to 0.96 at press time.

Typically, when this metric rises, it signals weakening sellers’ dominance on the derivatives market while buyers slowly step in.

Source: CryptoQuant

That said, if buyers keep opening longs while BTC continues dropping, the imbalance heightens the risk of cascading liquidations.

If spot selling persists, BTC could revisit $107k. For reversal, spot buyers must re-enter to support the price and offset derivatives pressure.